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Vienna – Defying the international community, Iran has sharply upgraded its capacity to enrich uranium in recent months while the outside world’s access to and grasp of Iran’s nuclear program “has deteriorated,” according to a unusually blunt report Wednesday by the International Atomic Energy Agency.

As two U.S. aircraft carriers and a flotilla of warships steamed into the Persian Gulf for previously unannounced exercises off Iranian shores, the U.N. nuclear watchdog agency warned that it could not “provide assurances about … the exclusively peaceful nature” of Iran’s expanding nuclear effort.

Iran has begun low-level operations of 1,312 centrifuges, which are used to enrich uranium, and has begun testing or is constructing 820 additional centrifuges, in a vast underground chamber at the country’s main nuclear facility at Natanz, the IAEA report said. The total is more than three times as many centrifuges as Iran had installed in the facility three months ago.

“What they are doing now is significant,” said a senior U.N. official who spoke on condition he not be identified because the report officially goes to the Security Council before it may be released. “Their progress is accelerating.”

Iran’s continued refusal to comply with Security Council demands for an immediate freeze of its nuclear program is likely to spur another round of U.N. economic sanctions, the third set since December 2006.

Iran’s ambassador here, Ali Ashgar Soltanieh, disputed portions of the report and insisted that Iran has provided “full cooperation and full transparency” to the U.N. inspectors.

Soltanieh said that Iran’s nuclear program will produce only electricity, not nuclear weapons, as the West fears.

The U.S. Navy separately began a major, previously unscheduled exercise in the Persian Gulf in one of the largest shows of military force in the region’s seas since the 2003 invasion of Iraq.

Navy officials insisted the air and sea maneuvers were not designed to increase diplomatic pressure on Iran.

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